Development of Agro-Industries and Agro-Enterprises in the EAC Region

54 Pages·2011·1.14 MB·English

Report on Regional Workshop and Policy Dialogue
Development of Agro-Industries and
Agro-Enterprises in the EAC Region
i
Executive Summary
Introduction investment in agriculture for development
In March 2010, the African Union (AU) should go beyond improvements of on-farm
Member States endorsed the African productivity. More efforts and investment
Agribusiness and Agro-industries should be devoted to development of all
Development Initiative (3ADI) in Abuja, post-production segments of agriculture value
Nigeria. The vision of this Initiative is chains. Accelerated development of agro-
competitive, sustainable and inclusive industries and agrienterprises will be a critical
agro-industries and agribusinesses part of such a strategy.
in Africa as a pathway to increased
economic growth and food security in To respond to a call made in the Abuja
the continent. Declaration, the EAC Secretariat, with the
support of Kilimo Trust and FAO, initiated a
The Heads of State and Government process of developing the EAC’s chapter of
attending the occasion registered their 3ADI, titled “The East Africa Agri-business
concern that Africa is yet to make much and Agro-industries Development Program
progress towards adding value to primary (E3ADP)”. This workshop was designed as
agricultural commodities and exploiting the first step to galvanize stakeholders’ views
the opportunities for processed agro-food and recommendations.
products in local, regional, and international
markets. On the other hand, several African The Workshop was divided into two parts.
countries have made good progress on the The first, from 15 – 17 March 2011,
production front such that many are now was a Technical Meeting attended by 61
registering agricultural surpluses, especially experts and senior technical officers from
in food commodities. However, most of the governments, development agencies, and
surplus is often lost or wasted due to lack of the private sector. The second part was a
processing and marketing. Policy Dialogue Meeting held on 17th March
2011 and attended by 30 Senior Directors
Lack of progress towards adding value to and leaders from relevant government
primary agricultural commodities for export departments in the five EAC Partner States,
causes low returns from agricultural exports development agencies, and the private sector.
because of the lost opportunity for creating
wealth as a high proportion of the value The participants from governments cut
does not accrue to the region. Furthermore, across the departments responsible for policy,
inadequate processing to extend the length industrialization, agro-industries, trade
of stable shelf-life of perishable food and marketing, crops, livestock, fisheries,
commodities such as starchy crops, vegetables and rural infrastructure. The private sector
and fruits, and livestock and fish products, included representation of two of the largest
leads to a very limited utilization of all commercial banks in the EAC Region.
sources of food – causing the perpetual
hunger and malnutrition experienced in the In her opening speech, read on her behalf by
region. the Director of Industry Development, Mrs.
Sikazwe, the Permanent Secretary of the
Therefore, to ensure income security, food Ministry of Industry and Trade of Tanzania,
security, and nutrition security of the majority Ms. Joyce Mapunjo, emphasized the need
of the people in Sub-Saharan Africa, for a high level of regional collaboration if
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Executive Summary
acceleration of the development of agro- with the EAC regional block and finally the
industries and agro-business in the EAC whole of Africa. … it is necessary to pool
Region was to take place. On this she said: resources for mutual benefits in technology
“Each of us has a limited capacity to achieve development and supply, infrastructure
an optimum industrialization for agricultural development, branding, packaging, and
transformation. Therefore, there is an urgent accreditation of food laboratories.”
need for putting our efforts together starting
Key Issues on Agro-Industry Development in the EAC Region
Agro-industries in the EAC Region have the d) Inadequate Research &
following characteristics: Development – leading to very limited
a) Major component of home grown technologies and/or local
manufacturing: capacity to search for import, and
i) Agricultural value added absorb knowledge and technologies from
contributes more than 80% of the other countries.
total manufacturing in the region;
ii) Food processing accounts for e) Limited supportive
40% of the value added by agro- infrastructure– is a critical constraint
industries, and more than about to the development of agro-industries
30% of the total manufacturing from both the perspective of supply
in the region – however, highest of raw materials and marketing and
proportion of the installed capacity trade of finished products. There are
for food processing is for primary constraints in terms of:
processing only; and i) Lack of, and/or significant length
iii) Only about 28% of the agricultural of poorly maintained feeder roads
produce in the region is processed. which greatly increase the time and
cost of transporting agricultural
b) Low utilization of installed raw materials to agro-processing
capacity – with most operating at plants;
30–50%, due to a combination of
factors including: (i) unreliable supply of ii) Limited reach of electrical
good quality raw materials and inputs; power grids because of very little
(ii) the scatter of the small quantities investment in electrical-powered
produced by each smallholder farmer; equipment and the necessary
and (iii) long distances between areas connections to allow rural areas to
of production and location of agro- exploit the national grid;
industries coupled by poor state of
transportation infrastructure. iii) Poor storage and marketing
infrastructure in the rural areas
c) Limited technical skills base to limiting the ability of producers
run agro-processing facilities – to store and market their produce
caused by little vocational training on efficiently while reducing post-
the operation and maintenance of agro- harvest losses.
processing plants and equipment.
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Executive Summary
The identified key opportunities in agro- into highly differentiated consumer and
industries development include the following: industrial products.
a) Rural-based primary and
secondary processing, especially to c) Equipment manufacturing and
increase the length of stable shelf-life supply – because most agro-processing
on major perishable commodities, is the equipment in the EAC region is
highest priority at the moment. currently being imported from China
and India, and given that the technology
b) Tertiary processing of cereals is not complicated there is a huge
to high valued differentiated opportunity for import substitution.
products because the relatively
advanced primary and secondary
processing of cereals opens up
opportunities for further processing
Opportunities for Regional Collaboration
The country paper from Burundi suggested b) Development of win-win contract
regional collaboration with respect to: farming; and
a) Improved reach of financial services; c) Improvement of financial services and
b) Development of efficient regional investment through special funds, agri-
agricultural value chains; and insurance, and loan guarantee schemes.
c) Mitigation of effects of high variability
of weather. The country paper from Tanzania suggested
regional collaboration with respect to:
The country paper from Kenya suggested a) Appropriate and affordable
regional collaboration with respect to: technology for agro-industries and
a) Research and Development (R&D) and effective management to reduce
transfer of technologies; post-harvest losses;
b) Harmonization and further development b) Improvement of quality and
of quality standards; availability of packaging;
c) Sensitization of potential investors c) Branding – especially the
(local East Africans and foreigners) on development of regional brands;
available opportunities in agro-industries and
development; d) Harmonization and further
d) Training and capacity building by development of quality standards
pooling resources to reduce costs; including accreditation of food
e) Business incubation and safety laboratories.
entrepreneurship development, and
f) Development of prioritized agro- The country paper from Uganda suggested
industries in the region on the basis of regional collaboration with respect to:
comparative advantages. a) Attraction of investment in agro-
processing facilities for priority value
The country paper from Rwanda suggested chains;
regional collaboration with respect to: b) Manufacturing and supply of packaging
a) Market data and information; materials;
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Executive Summary
c) Establishment of business incubation b) The Third EAC Development Strategy
centers; which among other priorities calls
d) Manufacture and supply of intermediate for promotion of value addition,
inputs to agro-industries; and productivity, and competitive
e) Formation of industrial clusters. agricultural supplies to realize cross-
border trade for sustainable food
Furthermore, the workshop was informed security;
that the following policy and strategic c) The EAC Food Security Action Plan
objectives as well as initiatives have already 2011 – 2015;
been approved and/or initiated at the EAC d) A draft EAC Industrialisation Policy
level to foster regional collaboration: and Strategy to be completed by the
a) The fully implemented EAC Customs end of 2011. In addition, an EAC-
Union (2005), and the recently UNIDO Industrial Upgrading and
operationalised EAC Common Market Modernization Programme has been
Protocol (2010); developed.
Recommendations from Thematic Work Groups
Key themes emerging from the plenary Four groups were formed, one group for each
sessions: of themes 1, 2, 3 and 4. Each group was also
a) Theme 1: on Agro-industry requested to deliberate on themes 5 and 6 as
these were cross-cutting.
Development – including supportive
agribusiness and agri-enterprises;
Recommendations from the Work Groups
b) Theme 2: on Markets and Trade – to
a) Theme 1: Agro-industry and Agri-
cover all aspects of market access and
enterprises Development:
market information;
i) Improve the rate of capacity
c) Theme 3: on Infrastructure – to focus utilization of existing and planned
on last-mile infrastructure required agro-industries through better
to improve linkages between areas of efficiencies in supply/procurement
of raw materials;
high agricultural production and agro-
ii) Strengthen regional value chains
industries as well as urban areas;
to enhance returns and wealth
d) Theme 4: on Policy and Institutional
creation; and
frameworks necessary to support
iii) Enhance access to, and increase
accelerated development of agro- adoption of, affordable and
industries; appropriate technologies.
e) Theme 5: on Attracting Finance
b) Theme 2: Markets and Trade:
and Investment needed to support
i) Expand regional trade in agro-
accelerated development of agro-
processed products;
industry; and
ii) Improve market information
f) Theme 6: on Capacity Building to create
systems;
a critical mass of experts and skilled
iii) Regional branding – identify
workers to sustain expanded agro- national and regional opportunities
industries in the region. and prioritize production,
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Executive Summary
processing, and branding; and and sufficient to accelerate the
iv) Improve economies of scale and development of agro-processing in
penetration of foreign markets by the rural areas.
developing clusters of value chain
actors. d) Theme 4: Policy and Institutions:
i) A regional strategy and program on
c) Theme 3: Infrastructure Development agro-industries development;
and Maintenance: ii) Joint projects and actions to
i) Transport: the main bottleneck is in operationalise the regional strategy;
feeder roads for linking production iii) Power supply – especially to jointly
areas to major transportation explore and develop critical sources
infrastructure in terms of highways, of power available in the region
railways, and ports. There is with a regional market perspective,
therefore an urgent need to: and find economic ways of
• Balance investment between reducing power tariffs; and
expanding major infrastructure iv) Public-private-partnerships (PPP)
and ensuring that such especially by mainstreaming the
infrastructure is fully linked development of agro-industries in
to areas of high agricultural major public initiatives as well as
potential; public procurement policies.
• Integrate the development
of agro-industries and e) Theme 5: Financing:
agribusinesses with i) Expand the availability of
infrastructure master plans; investment capital at costs
and comparable to other parts of the
• Harmonize specifications world;
for the roads in the EAC ii) Establish means of attracting equity
to encourage cross-border investors to agro-industries; and
collaboration. iii) Strengthen collaboration and cross-
ii) Warehousing – because of the role border banking in the region to
it plays in bulking commodities build economies of scale.
and thus reducing transaction
costs for supply of raw materials to f) Theme 6: Capacity Building
agro-industries, the working group i) Develop agro-industries’ incubation
recommended priority actions to centres;
expand warehousing in rural areas. ii) Establish and/or expand centres
iii) Power Supply – perhaps the of excellence dealing with agro-
weakest link in the EAC at the industries and agri-enterprises;
moment, was identified as the iii) Establish extension services dealing
core driver of agro-industries with agro-industries and agri-
development. The working group enterprises; and
recommended more investments iv) Expand and give priority to
to link areas of high agricultural development of critical skills
production potential to the required in agro-industries and
National Grid, with appropriate agribusiness.
last-mile connections necessary
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Executive Summary
Key Recommendations from the Technical Workshop
Building on the recommendations of c) Theme 3: Making infrastructure effective
the working groups the plenary session in supporting agro-industries and agri-
produced the following short list of enterprises in the EAC;
Policy Recommendations for the Policy d) Theme 4: Ensuring policy and
Dialogue Meeting with Directors. The institutional framework that is more
recommendation was to adopt five themes for supportive; and
the proposed E3ADP: e) Theme 5: Attracting adequate finance
a) Theme 1: Accelerated development of and investment.
agro-industry in the EAC;
b) Theme 2: Getting markets and trade
right for the thriving agro-industries;
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Outcomes of the Policy Roundtable Dialogue by Directors
Adoption of the E3ADP: – the Directors vi) Regional brands to support export
endorsed the priority themes and results of agro-industry products; and
recommended for the E3ADP, and further vii) Vibrant regional commodity
endorsed the development of the Programme exchanges.
to produce the following results:
c) Theme 3: Making Existing and
a) Theme 1: Accelerated Planned Infrastructure Effective
Development of Agro-industry – in Supporting the Development
designed to mainstream agro-industries of Agro-Industries and Agri-
in key agriculture for development enterprises. It was acknowledged that
programmes and agri-enterprises, with there is already major initiatives in the
the following intermediate results: EAC on infrastructure development, so
i) A critical mass of skilled personnel the E3ADP will focus on:
to plan, establish, and effectively i) Improved coordination and
manage agro-industries; synergy in the development of
ii) Well organized and strong regional infrastructure vs. agro-industries;
agricultural value chains for regular ii) Strategy for expending last-
and quality supply of raw materials; mile infrastructure to ensure the
iii) Improved culture of quality and infrastructure enables the stable and
productivity; continuous flow of raw materials to
iv) Regional agro-industry clusters; agro-industries; and
v) Centres of excellence, business iii) Agro-industry clusters deliberately
incubation and BDS across the designed and located to effectively
region to support especially SME utilize the existing or planned
agro-industries and agri-enterprises; infrastructure.
and
vi) Regionally coordinated R&D d) Theme 4: Policy and Institutional
in agro-industries to stimulate Framework to enhanced “business
innovation. climate” for agro-industries and agri-
business. It was noted that relevant
b) Theme 2: Getting Markets and policies are generally in place – what
Trade Right – is critical in accelerating remains is implementation. Therefore,
development of agro-industries. The on this aspect E3ADP will strive to
workshop recommended that E3ADP ensure:
should be designed to deliver the i) Consolidated regional strategy for
following results: agro-industry development;
i) Harmonized and/or regional ii) Regionally shared “public good”
standards; services to support agro-industries
ii) Robust Regional Market and agri-enterprises;
Information System supported by iii) Regionally-shared support
very good market research; industries such as manufacture of
iii) Minimum NTBs or none at all processing equipment;
across the region; iv) Strong synergies between agro-
iv) A strong EAC agro-industry industries development and other
association; programs in agriculture and
v) Strong regional value chains; industries in general; and
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Executive Summary
v) A mechanism for strong b) The E3ADP should identify and
coordination among Government enhance the comparative advantages
Ministries and EAC Departments among Partner States, and then build
working on aspects with implication on these to develop the regional
on agro-industries and agri- comparative advantages that would
business. distinguish the EAC region.
c) The E3ADP should be driven by
e) Theme 5: Attracting finance and national level priorities starting with
investment for agro-industries in cross-cutting aspects selected by national
the region by focusing on regional stakeholders for regional collaboration.
opportunities for collaborating with d) The E3ADP should be fast-tracked
stakeholders to mobilize and put into for implementation, and if possible
place the necessary incentives and should be launched by the end of 2011,
resources to make agricultural finance especially by working hard to turn into
more accessible. reality the well appreciated indication
by FAO that it is prepared to consider
However, the directors emphasized that the a request from the EAC for a Technical
following should be done in the process of Cooperation Programme (TCP) to
developing the programme: support the further development of
a) The E3ADP must be harmonized with E3ADP.
existing and relevant initiatives in the
region and Partner States.
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Statement by the Organizers
The workshop and policy dialogue meeting reported here are products of a close collaboration
between the following organizations:
• The EAC Secretariat through the Directorate of Productive and Social Sectors;
• FAO (the Rural Infrastructure and Agro-industries Division, the Sub-Regional Office for
Eastern Africa, and the FAO Representation in Tanzania);
• UNIDO (the Agribusiness Development Branch and the country office in Tanzania); and
• Kilimo Trust – an organization focused on catalyzing the growth and competitiveness of
strategic agricultural sectors for the benefit of large numbers of the people in the EAC
Region.
We are grateful and acknowledge the support of the following in making this workshop a reality:
• Government of United Republic of Tanzania through the Ministry of Industry and Trade,
for hosting the Workshop and providing in-kind logistical support during the preparations;

• The Chairperson of the Committee on Agriculture, Tourism, and Natural Resources
(ATNR) of the East African Legislative Assembly, Hon. Safina Kwekwe Tsungu (MP) – for
chairing the Dialogue Meeting;
• Commissioners and Senior Directors from Government Departments in Burundi, Kenya,
Rwanda, Tanzania, and Uganda, who set time aside to participate at the Dialogue Meeting;
• The Private Companies which supported the workshop, especially those which made case
study presentation of their agro-industrial businesses; and

• All the participants and their organizations.
We hope that this report of the proceedings of the Workshop and Dialogue Meeting will serve
as a reference going forward in designing and implementing robust plans for accelerating of the
development of agro-industries and related agro-enterprises in the EAC Region. The partners
are committed to continuing in spearheading the development and implementation of the East
African Agro-industries and Agri-enterprises Development Programme (E3ADP).
Nuhu Hatibu Moses Marwa Doyle Baker Frank Hartwich
CEO Principal Ag Economist Senior Technical Officer Industrial Development Officer
Kilimo Trust for Director Productive Sectors Rural Infrastructure and Agro- Agribusiness Development
EAC Secretariat industries Division Branch,
FAO UNIDO
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